Creating a Household Budget

Your household budget consists of three categories: What you spent on a monthly basis last year, what you plan to spend this year based on your personal goals, and what you actually spend. Here are some tips for creating a household budget:

  1. Project Expenditures for each category (food, bills, entertainment, etc.) for each month, based on last year. (Don't forget the trip to see your Aunt Betty in August and holiday shopping in December.) To get started, use our budget worksheet as a guide.
  2. List anticipated income for each month.
  3. Integrate your goals. Knowing what you want will help you achieve it. Do you want to save for retirement? Have a nicer car? Take professional classes at the local college? Make sure these expenses are part of your plan.
  4. Begin debt reduction. You can save a bundle by paying off installment debt like credit cards. How? Cut back on charging expenses, but continue making the same payments each month.
  5. Always pay back the higher interest rates first - you'll save more.

  6. Save. Save. Save. A savings plan is a great way to change money habits. Plan to save every month. Even if it's only a few dollars here and there. Before you know it, you'll have money around for life's little emergencies.

    Try these household savings tips:

    • If the company where you work offers a retirement plan that deducts money from your paycheck, join it! Because it's often deducted pre-tax, it's free money!
    • Save your change at the end of each day, then bring it to the bank at the end of each month.
    • Saving $1 a day will build up $365 by the end of the year, $1,825 in five years - and that doesn't even count the interest your money will earn in the bank.
  7. Obtaining and maintaning good credit is important to remain in good financial standing with credit bureaus, otherwise it can be difficult to obtain a mortgage or even get a job.
    • To build good credit, apply for a small loan at the bank, thrift or credit union where you have checking and saving accounts.
    • Apply for credit with a local store, such as a department store. They typically have a lower credit limit but have a higher APR.
    • Make a large down payment on a purchase and negotiate credit payments for the balance.
    • Pay your bills on time. This will help to build a better credit history.
    • Ask lenders to review your history of making rent and utility payments to demonstrate your ability to pay.

Good luck with your new household budget. With a little thought and effort, you'll find that saving is easier than you think.